Following an application by ASIC, the Federal Court of Australia has today ordered the appointment of Ross Blakeley and Quentin Olde of FTI Consulting as joint and several provisional liquidators of CME Capital Australia Pty Ltd (CME Capital Australia), Boston Pacific Capital Australia Pty Ltd (Boston Pacific Capital Australia), Boston Pacific Capital Pty Ltd (Boston Pacific Capital), GKN Capital Pty Ltd (GKN) and IMCG Pty Ltd (IMCG).

ASIC’s application for the appointment of a provisional liquidator was based on numerous concerns, including the following:

• CME Capital Australia, Boston Pacific Capital Australia and GKN have raised funds totalling approximately $13.55 million from investors, predominantly through websites operated by those companies that draw traffic via Google AdWords marketing.
• The funds were raised unlawfully in that offers to invest were made by the companies without a disclosure document and to individuals who were not professional investors.
• Of the funds that were raised:
  • approximately $1.7 million was lent to Berkshire NWI LLC (Berkshire), a company based in the United States that is controlled by Mr Michael Petrou, who is also the sole director of CME Capital Australia, Boston Pacific Capital Australia and GKN; 
  • approximately $7.2 million was lent to IMCG Pty Ltd (IMCG) for the purpose of trading in U.S. securities; and
  • approximately $2 million was lent to Loma Estate Pty Ltd (Loma).

• The loans to Berskhire, IMCG and Loma are unsecured and no principal or interest payments are required to be repaid for a period of 6 years.
• The loan agreements have been drafted with terms that are heavily in favour of Berkshire, Loma and IMCG, with Mr Petrou having drafted the agreements.
• While a loan has been advanced to Berkshire, that company does not operate a bank account in the U.S.
• The sole director of IMCG and its trading decision-maker is Mr Branislav Grujicic. At the time the loan of $7.2 million was made to IMCG it had no track record to demonstrate it would be able to repay the principal and interest, with Mr Grujicic having very limited trading experience (having only conduced personal trading totalling approximately $5,000 to $10,000).
• Of the $7.2 million lent to IMCG, a total of $2 million has been lost by that company as a result of its trading in U.S. securities. Approximately $1 million has been paid by IMCG into Mr Grujicic’s personal trading account.
• No funds have been remitted back by Loma or Berkshire to CME Capital Australia, Boston Pacific Capital Australia and GKN.
• While IMCG has remitted funds back to CME Capital Australia Pty Ltd at its request for the purposes of making payments to investors, those funds were not derived from any profits made by IMCG.
• That Mr Petrou and Mr Grujicic may have used the funds of CME Capital Australia, Boston Pacific Capital Australia or GKN to meet the lease payments of a property in Rowville which is resided in by Mr Lou Garita, an undischarged bankrupt who may be managing Loma. 
• That Mr Petrou and Mr Grujicic may have used the funds of CME Capital Australia, Boston Pacific Capital Australia or GKN for overseas travel not related to the business operations of those companies.
• Neither CME Capital Australia, Boston Pacific Capital Australia nor GKN have received any returns from their business activities.
• While CME Capital Australia, Boston Pacific Capital Australia and GKN Capital Pty Ltd have made interest payments to investors, those payments were made by drawing upon existing investor monies held in bank accounts.

Justice Moshinsky, having regard to the concerns identified by ASIC in relation to the companies, ordered the appointment of provisional liquidators. Under the orders made, the provisional liquidators are to provide to the court within 42 days   a report which includes:

• the identification of the assets and liabilities of each of the companies;
• an opinion as to the solvency of each of the companies;
• the likely return to creditors and any other information necessary to enable the financial position of the companies to be assessed;
• any suspected contravention of the Corporations Act 2001 by any of the companies or their directors/officers.

The matter will be listed for a further hearing on a date to be fixed.

ASIC’s investigation into the activities of the companies is continuing.

Dowload the court's reasons for the judgement.

Background

Mr Petrou is the sole director of CME Capital Australia, Boston Pacific Capital Australia, Boston Pacific Capital and GKN which operate from a residence in Rowville, Victoria. Mr Grujicic is the sole director and shareholder of IMCG, with the company operating from his residence in Hallam, Victoria.

The appointment of a provisional liquidator follows orders made by the court on 17 November 2015 that froze the assets of the companies and restrained Mr Petrou and Mr Grujicic from leaving Australia. The provisional liquidators now have control of those assets (with the freeze lifted) and Mr Petrou and Mr Grujicic continue to be restrained from departing the country (refer: 15-342MR).

On 11 December 2015 Mr Petrou appointed Luke Targett and Dennis Turner of BDO as joint and several administrators of Boston Pacific Capital Pty Ltd, Boston Pacific Capital Australia Pty Ltd, GKN Capital Pty Ltd and CME Capital Australia Pty Ltd.

On 21 December 2015 the administrators informed the Court that, after considering the circumstances of the companies and a proposal that had been presented to them by Mr Petrou, they were of the view that the continuation of the administration would not be in the best interests of creditors. The appointment by the court of provisional liquidators to those companies has terminated the administration.